Here’s an excerpt from the DOJ response to Barnes & Noble: “B&N maintains that allowing retailer discounting will, by driving down consumer prices, subject consumers to a variety of anticompetitive effects. But the procompetitive consumer benefits that B&N alleges are the result of the conspiracy are either not substantiated or are untethered to the conspiracy. B&N does not explain how freeing retailers to compete on price will lead to “uncompetitive,” rather than competitive, pricing, and its claim that the return of retail price competition will discourage investment is belied by the fact that, shortly after the proposed Final Judgment was filed in this matter, B&N was able to attract a $300 million investment from Microsoft specifically to “battle with Amazon and Apple in e-books.”

But since you may have better things to do with your Monday, a quick summary of the DOJ’s response:

Not surprisingly, the DOJ says all of the complaints about its settlement with HarperCollins, Hachette and Simon & Schuster over e-book pricing are from self-interested whiners. In their words: “Many critics of the settlements view the consequences of the conspiracy — higher prices — as serving their own self-interests, and they prefer that unfettered competition be replaced by industry collusion that places the welfare of certain firms over that of the public.”

You can’t accuse the DOJ lawyers of immodesty. They suggest that three recent announcements — that Microsoft would invest in Barnes & Noble’s Nook platform; that Microsoft is going to produce its own Surface tablets; and that Google would sell its own Nexus 7 tablets — prove that “more companies are investing to enter or expand in the market and compete against Amazon, Apple”, and they suggest that they should get some credit for this.

If agency model replaces wholesale for everything....

MSRP will become MRP. Same price of everything where nothing can ever go on sale.

Stores don't have to compete with discount.

Manufacturers win. Retailers win. Customers lose.

Quote:

The DoJ also rejected an implication it said it drew from the Authors Guild submission, that price-fixing should be permitted in the publishing industry because of the cultural role books play in society. “An argument that a particular industry or market deserves a blanket exemption from the antitrust laws should be directed to Congress, rather than the United States or the court,” the DoJ stated.

Would Congress vote for price-fixing? (it's the norm for books in France, Germany and Spain).

868 public comments:

70 in favor of settlement
798 opposed

Quote:

The DOJ received 868 public comments to the proposed settlement, with nearly 70 in favour of the settlement and the remainder opposing it. "Most of these came from publishers, authors, agents and bookstores that acknowledged an interest in higher retail e-book prices," the DoJ noted.

Nothing in the proposed Final Judgment would force Apple or B&N to exercise discounting authority—they are free to carry out their own businesses exactly as before. What they may not do is continue to rely on a conspiracy to restrain their competitors.

Its not surprising that the DOJ thought it got it right with is settlement proposal.

Quote:

But first, a bit of civic stagecraft: The Department of Justice posted the settlement, invited public comment and then ignored the public comment.

What 's surprising is that ninety per cent of the comments opposed the settlement. The opposition to the settlement is deep and widespread through the book industry, going well beyond the reviled BPHs to include independent publishers, chain bookstores, independent bookstores, authors and agents. That's everybody in the book industry not named Amazon.
The DOJ put the best face on it by quoting the CFA and the Konrathites-indie authors associated with Amazon- but its pretty much lipstick on a pig.

Some tidbits:

1. The DOJ affirmed that Amazon's ebook business has been consistently profitable. This counters what many people-including me- believed, which is that Amazon was using ebooks as a loss leader.

2. The DOJ says, repeatedly, that the settlement will only last two years and the publishers can go back to "full agency" after that. The strong hint I get from that is that a return by full agency by the BPHs is likely, if not inevitable, and the DOJ knows that.

3. The DOJ thinks that Amazon won't abuse its monopoly position (should they regain that) by raising consumer prices. It doesn't really explain why Amazon would not do that.

4. The DOJ has a novel suggestion to the "Showroom/Free Rider" problem: that the publishers should pay the B&M stores for marketing their books.

Quote:

Settling Defendants may compensate brick-and-mortar
retailers for e-book “marketing or other promotional services.” PFJ § VI.A. The CIS
elaborates that this provision is intended “to support brick-and-mortar retailers by directly paying for promotion or marketing efforts.” CIS at 14. Rather than subsidizing these services with the earnings from collusive e-book profits, Settling Defendants may pay brick-and-mortar stores directly for marketing and promotional support.

Not sure how that works out, but I have suggested that we could be moving to vertical solutions in the book industry where one company controls the entire supply chain from developing the author to putting the book in its store. The settlement might be a move in that direction, in that the DOJ appears to be saying that publishers should be investing in B&M stores.

5. It will be up to the BPHs to police the discounting restrictions on the retailers by negotiating with the retailers to insert auditing clauses in the contracts with retailers.
(I think it quite likely that the DOJ will be drawn into disputes about discounting restrictions, but we will have to wait and see).

Define lose. Personally I would see lots of different retailers existing as a good thing. It would allow specialisation of the same kind that we used to have in real shops in the UK before we got conned into thinking "competition" was good for consumers. Look how that one ended. A handful of books in grocery shops to choose from. But as long as they're cheap, yeah?

3. The DOJ thinks that Amazon won't abuse its monopoly position (should they regain that) by raising consumer prices. It doesn't really explain why Amazon would not do that.

That wasn't the way I read that bit. What I thought they were saying was that it was paradoxical that the opponents were raising the spectre of Amazon using a monopoly position to raise prices while at the same time they'd been engineering an agreement constructed to allow them to raise prices themselves.

Define lose. Personally I would see lots of different retailers existing as a good thing. It would allow specialisation of the same kind that we used to have in real shops in the UK before we got conned into thinking "competition" was good for consumers. Look how that one ended. A handful of books in grocery shops to choose from. But as long as they're cheap, yeah?

Consumers lose because retailers are not allowed to offer a discount. If Amazon/Apple/Kobo/Nook/Sony/Google want to offer 20% discount (from its 30% cut), why can't they?

How would you like it if Hollywood studios control the final price of Blu-Ray/DVD? (prices would be the SAME whether it is Best Buy, Target, Wal-Mart, FYI etc...)

Quote:

Personally I would see lots of different retailers existing as a good thing.
These will be major competitions for ebook selling: